Inflated Reputations: Uncertainty, Leniency, and Moral Wiggle Room in Trader Feedback Systems

Published Online:https://doi.org/10.1287/mnsc.2018.3191

References

  • Ambrus A, Greiner B (2012) Imperfect public monitoring with costly punishment: An experimental study. Amer. Econom. Rev. 102(7):3317–3332.CrossrefGoogle Scholar
  • Andreoni J, Bernheim BD (2009) Social image and the 50–50 norm: A theoretical and experimental analysis of audience effects. Econometrica 77(5):1607–1636.CrossrefGoogle Scholar
  • Andreoni J, Rao JM (2011) The power of asking: How communication affects selfishness, empathy, and altruism. J. Public Econom. 95(7–8):513–520.CrossrefGoogle Scholar
  • Ba S, Pavlou PA (2002) Evidence of the effect of trust building technology in electronic markets: Price premiums and buyer behavior. MIS Quart. 26(3):243–268.CrossrefGoogle Scholar
  • Bajari P, Hortacsu A (2003) The winner’s curse, reserve prices, and endogenous entry: Empirical insights from eBay auctions. RAND J. Econom. 34(2):329–355.CrossrefGoogle Scholar
  • Bajari P, Hortaçsu A (2004) Economic insights from internet auctions. J. Econom. Literature 42(2):457–486.CrossrefGoogle Scholar
  • Bar-Isaac H, Tadelis S (2008) Seller reputation. Foundations Trends Microeconom. 4(4):273–351.CrossrefGoogle Scholar
  • Bauerly RJ (2009) Online auction fraud and eBay. Marketing Management J. 19(1):133–143.Google Scholar
  • Bénabou R, Tirole J (2011) Identity, morals, and taboos: Beliefs as assets. Quart. J. Econom. 126(2):805–855.CrossrefGoogle Scholar
  • Bereby-Meyer Y, Roth AE (2006) The speed of learning in noisy games: Partial reinforcement and the sustainability of cooperation. Amer. Econom. Rev. 96(4):1029–1042.CrossrefGoogle Scholar
  • Bigelow J (1904) The Works of Benjamin Franklin in Twelve Volumes, vol. 11 (G. P. Putnam's Sons, New York).Google Scholar
  • Bohnet I, Huck S (2004) Repetition and reputation: Implications for trust and trustworthiness when institutions change. Amer. Econom. Rev. 94(2):362–366.CrossrefGoogle Scholar
  • Bol JC (2011) The determinants and performance effects of managers’ performance evaluation biases. Accounting Rev. 86(5):1549–1575.CrossrefGoogle Scholar
  • Bolton GE, Greiner B, Ockenfels A (2013) Engineering trust: Reciprocity in the production of reputation information. Management Sci. 59(2):265–285.LinkGoogle Scholar
  • Brandts J, Figueras N (2003) An exploration of reputation formation in experimental games. J. Econom. Behav. Organ. 50(1):89–115.CrossrefGoogle Scholar
  • Bretz RD Jr, Milkovich GT, Read W (1992) The current state of performance appraisal research and practice: Concerns, directions, and implications. J. Management 18(2):321–352.CrossrefGoogle Scholar
  • Cai H, Wang JT-Y (2006) Overcommunication in strategic information transmission games. Games Econom. Behav. 56(1):7–36.CrossrefGoogle Scholar
  • Chen Y, Harper FM, Konstan J, Li SX (2010) Social comparisons and contributions to online communities: A field experiment on MovieLens. Amer. Econom. Rev. 100(4):1358–1398.CrossrefGoogle Scholar
  • Cleves MA (2002) From the help desk: Comparing areas under receiver operating characteristic curves from two or more probit or logit models. Stata J. 2(3):301–313.CrossrefGoogle Scholar
  • Dal Bó P, Fréchette GR (2018) On the determinants of cooperation in infinitely repeated games: A survey. J. Econom. Literature 56(1):60–114.CrossrefGoogle Scholar
  • Dana J, Cain DM, Dawes RM (2006) What you don’t know won’t hurt me: Costly (but quiet) exit in dictator games. Organ. Behav. Human Decision Processes 100(2):193–201.CrossrefGoogle Scholar
  • Dana J, Weber R, Kuang J (2007) Exploiting moral wiggle room: Experiments demonstrating an illusory preference for fairness. Econom. Theory 33(1):67–80.CrossrefGoogle Scholar
  • de Haan T, Offerman T, Sloof R (2015) Money talks? An experimental investigation of cheap talk and burned money. Internat. Econom. Rev. 56(4):1385–1426.CrossrefGoogle Scholar
  • Dellarocas C (2001) Analyzing the economic efficiency of eBay-like online reputation reporting mechanisms. Proc. 3rd ACM Conf. Electronic Commerce (ACM, New York), 171–179.Google Scholar
  • Dellarocas C (2005) Reputation mechanism design in online trading environments with pure moral hazard. Inform. Systems Res. 16(2):209–230.LinkGoogle Scholar
  • Dellarocas C, Wood CA (2008) The sound of silence in online feedback: Estimating trading risks in the presence of reporting bias. Management Sci. 54(3):460–476.LinkGoogle Scholar
  • Dickson ES, Gordon SC, Huber GA (2009) Enforcement and compliance in an uncertain world: An experimental investigation. J. Politics 71(4):1357–1378.CrossrefGoogle Scholar
  • Dulleck BU, Kerschbamer R, Sutter M (2011) The economics of credence goods: An experiment on the role of liability, verifiability, reputation, and competition. Amer. Econom. Rev. 101(2):530–559.Google Scholar
  • Falk A, Heckman JJ (2009) Laboratory experiments are a major source of knowledge in the social sciences. Science 326(5952):535–538.CrossrefGoogle Scholar
  • Filipas A, Horton JJ, Golden J.M (2018) Reputation in the long-run. Working paper, New York University, New York.Google Scholar
  • Fischbacher U (2007) z-Tree: Zurich toolbox for ready-made economic experiments. Experiment. Econom. 10(2):171–178.CrossrefGoogle Scholar
  • Ganzach Y, Krantz DH (1991) The psychology of moderate prediction: II. Leniency and uncertainty. Organ. Behav. Human Decision Processes 48(2):169–192.CrossrefGoogle Scholar
  • Giebe T, Gürtler O (2012) Optimal contracts for lenient supervisors. J. Econom. Behav. Organ. 81(2):403–420.CrossrefGoogle Scholar
  • Golman R, Bhatia S (2012) Performance evaluation inflation and compression. Accounting, Organ. Soc. 37(8):534–543.CrossrefGoogle Scholar
  • Gregg DG, Scott JE (2006) The role of reputation systems in reducing on-line auction fraud. Internat. J. Electronic Commerce 10(3):95–120.CrossrefGoogle Scholar
  • Greif A (1993) Contract enforceability and economic institutions in early trade: The Maghribi Traders’ Coalition. Amer. Econom. Rev. 83(3):525–548.Google Scholar
  • Greiner B (2015) Subject pool recruitment procedures: Organizing experiments with ORSEE. J. Econom. Sci. Assoc. 1(1):114–125.Google Scholar
  • Grosskopf B, Sarin R (2010) Is reputation good or bad? An experiment. Amer. Economic Rev. 100(5):2187–2204.CrossrefGoogle Scholar
  • Grund C, Przemeck J (2012) Subjective performance appraisal and inequality aversion. Appl. Econom. 44(17):2149–2155.CrossrefGoogle Scholar
  • Güth W, Huck S, Ockenfels P (1996) Two-level ultimatum bargaining with incomplete information: An experimental study. Econom. J. 106(436):593–604.Google Scholar
  • Hanley JA, McNeil BJ (1982) The meaning and use of the area under a receiver operating characteristic (ROC) curve. Radiology 143(1):29–36.CrossrefGoogle Scholar
  • Hoffman E, McCabe K, Smith VL (1996) Social distance and other-regarding behavior in dictator games. Amer. Econom. Rev. 86(3):653–660.Google Scholar
  • Houser D, Wooders J (2006) Reputation in auctions: Theory, and evidence from eBay. J. Econom. Management Strategy 15(2):353–369.CrossrefGoogle Scholar
  • Hu N, Pavlou PA, Zhang J (2006) Can online reviews reveal a product’s true quality? Empirical findings and analytical modeling of online word-of-mouth communication. Feigenbaum J, Chuang DP, eds. Proc. 7th ACM Conf. Electronic Commerce (ACM Press, New York), 324–330.CrossrefGoogle Scholar
  • Hu N, Pavlou PA, Zhang J (2009) Overcoming the J-shaped distribution of product reviews. Comm. ACM 52(10):144–147.CrossrefGoogle Scholar
  • Jawahar IM, Williams CR (1997) Where all the children are above average: The performance appraisal purpose effect. Personnel Psych. 50(4):905–925.CrossrefGoogle Scholar
  • Jin GZ, Kato A (2006) Price, quality, and reputation: Evidence from an online field experiment. RAND J. Econom. 37(4):983–1005.CrossrefGoogle Scholar
  • Kauffman R, Wood C (2006) Doing their bidding: An empirical examination of factors that affect a buyer’s utility in internet auctions. Inform. Tech. Management 7(3):171–190.CrossrefGoogle Scholar
  • Klein TJ, Lambertz C, Spagnolo G, Stahl KO (2009) The actual structure of eBay’s feedback mechanism and early evidence on the effects of recent changes. Internat. J. Electronic Bus. 7(3):301–320.CrossrefGoogle Scholar
  • Klein TJ, Lambertz C, Stahl KO (2016) Market transparency, adverse selection, and moral hazard. J. Political Econom. 124(6):1677–1713.CrossrefGoogle Scholar
  • Kreps DM, Wilson R (1982) Reputation and imperfect information. J. Econom. Theory 27(2):253–279.CrossrefGoogle Scholar
  • Lafky J (2014) Why do people rate? Theory and evidence on online ratings. Games Econom. Behav. 87(September):554–570.CrossrefGoogle Scholar
  • Landy FJ, Farr JL (1980) Performance rating. Psych. Bull. 87(1):72–107.CrossrefGoogle Scholar
  • Larson JR (1986) Supervisors’ performance feedback to subordinates: The impact of subordinate performance valence and outcome dependence. Organ. Behav. Human Decision Processes 37(3):391–408.CrossrefGoogle Scholar
  • Malmendier U, Schmidt K (2017) You owe me. Amer. Econom. Rev. 107(2):493–526.CrossrefGoogle Scholar
  • Malmendier U, te Velde VL, Weber R (2014) Rethinking reciprocity. Annual Rev. Econom. 6:849–874.CrossrefGoogle Scholar
  • Marchegiani L, Reggiani T, Rizzolli M (2016) Loss averse agents and lenient supervisors in performance appraisal. J. Econom. Behav. Organ. 131(Part A):183–197.CrossrefGoogle Scholar
  • Markussen T, Putterman L, Tyran J-R (2016) Judicial error and cooperation. Eur. Econom. Rev. 89(October):372–388.CrossrefGoogle Scholar
  • Milgrom PR, North DC, Weingast BR (1990) The role of institutions in the revival of trade: The law merchant, private judges, and the Champagne fairs. Econom. Politics 2(1):1–23.CrossrefGoogle Scholar
  • Mimra W, Rasch A, Waibel C (2016) Price competition and reputation in credence goods markets: Experimental evidence. Games Econom. Behav. 100(November):337–352.CrossrefGoogle Scholar
  • Mitzkewitz M, Nagel R (1993) Experimental results on ultimatum games with incomplete information. Internat. J. Game Theory 22(2):171–198.CrossrefGoogle Scholar
  • Moers F (2005) Discretion and bias in performance evaluation: The impact of diversity and subjectivity. Accounting, Organ. Soc. 30(1):67–80.CrossrefGoogle Scholar
  • Nikiforakis N (2008) Punishment and counter-punishment in public good games: Can we really govern ourselves? J. Public Econom. 92(1–2):91–112.CrossrefGoogle Scholar
  • Nikiforakis N (2010) Feedback, punishment and cooperation in public good experiments. Games Econom. Behav. 68(2):689–702.CrossrefGoogle Scholar
  • Nosko C, Tadelis S (2015) The limits of reputation in platform markets: An empirical analysis and field experiment. Working paper, University of Chicago, Chicago.Google Scholar
  • Ockenfels A, Selten R (2014) Impulse balance in the newsvendor game. Games Econom. Behav. 86(July):237–247.CrossrefGoogle Scholar
  • Ockenfels A, Werner P (2012) “Hiding behind a small cake” in a newspaper dictator game. J. Econom. Behav. Organ. 82(1):82–85.CrossrefGoogle Scholar
  • Prendergast C (1999) The provision of incentives in firms. J. Econom. Literature 37(1):7–63.CrossrefGoogle Scholar
  • Prendergast C, Topel R (1993) Discretion and bias in performance evaluation. Eur. Econom. Rev. 37(2–3):355–365.CrossrefGoogle Scholar
  • Proserpio D, Zervas G (2017) Online reputation management: Estimating the impact of management responses on consumer reviews. Marketing Sci. 36(5):645–665.LinkGoogle Scholar
  • Reichling F (2004) Effects of reputation mechanisms on fraud prevention in eBay auction. Working paper, Stanford University, Stanford, CA.Google Scholar
  • Resnick P, Zeckhauser R (2002) Trust among strangers in internet transactions: Empirical analysis of eBay’s reputation system. Baye MR, ed. The Economics of the Internet and e-Commerce, Advances in Applied Microeconomics, vol. 11 (Emerald Group Publishing, Bingley, UK), 127–157.CrossrefGoogle Scholar
  • Resnick P, Zeckhauser R, Swanson J, Lockwood K (2006) The value of reputation on eBay: A controlled experiment. Experiment. Econom. 9(2):79–101.CrossrefGoogle Scholar
  • Rice SC (2012) Reputation and uncertainty in online markets: An experimental study. Inform. Systems Res. 23(2):436–452.LinkGoogle Scholar
  • Roth AE (2002) The economist as engineer: Game theory, experimentation, and computation as tools for design economics. Econometrica 70(4):1341–1378.CrossrefGoogle Scholar
  • Saal FE, Downey RG, Lahey MA (1980) Rating the ratings: Assessing the psychometric quality of rating data. Psych. Bull. 88(2):413–428.CrossrefGoogle Scholar
  • Saeedi M, Shen Z, Sundaresan N (2013) The value of feedback: An analysis of reputation system. Working paper, Ohio State University, Columbus.Google Scholar
  • Samak AC (2013) An experimental study of reputation with heterogeneous goods. Decision Support Systems 54(2):1134–1149.CrossrefGoogle Scholar
  • Sharon AT, Bartlett CJ (1969) Effect of instructional conditions in producing leniency on two types of rating scales. Personnel Psych. 22(3):251–263.CrossrefGoogle Scholar
  • Tadelis S (2011) The power of shame and the rationality of trust. Working paper, University of California, Berkeley, Berkeley.Google Scholar
  • Tadelis S (2016) Reputation and feedback systems in online platform markets. Annual Rev. Econom. 8:321–340.CrossrefGoogle Scholar
  • Taylor K, Wherry RJ (1951) A study of leniency in two rating systems. Personnel Psych. 4(1):39–47.CrossrefGoogle Scholar
  • Volokh A (1997) n Guilty men. Univ. Pennsylvania Law Rev. 146(2):173–216.CrossrefGoogle Scholar
  • Waung M, Highhouse S (1997) Fear of conflict and empathic buffering: Two explanations for the inflation of performance feedback. Organ. Behav. Human Decision Processes 71(1):37–54.CrossrefGoogle Scholar
  • Wilson R (1985) Reputations in games and markets. Roth AE, ed. Game-Theoretic Models of Bargaining (Cambridge University Press, Cambridge, UK), 27–62.CrossrefGoogle Scholar
  • Zervas G, Proserpio D, Byers J (2015) A first look at online reputation on Airbnb, where every stay is above average. Working paper, Boston University, Boston.Google Scholar
INFORMS site uses cookies to store information on your computer. Some are essential to make our site work; Others help us improve the user experience. By using this site, you consent to the placement of these cookies. Please read our Privacy Statement to learn more.